Nesheim Online Blog

MANAGING A STARTUP CRISIS

It will happen. More than once.

Many events can trigger a crisis. Perhaps it could be a very bad product review (“How could they say that?”). Or it might be a series of Tweets with misinformation (competitors actually do that). Sometimes a huge customer stops using your service (without warning). Or a vice president admits to sexual misconduct (your star executive).

Some bad event will trigger a jolt to your emotions as you grasp that something horrible has happened. You realize this terrible situation is likely to severely impact – or even might destroy – your wonderful startup. Fear is immediately triggered, typically resulting in a wild rush to escape or stand frozen in the headlights. I’ve seen the best of the best react with cold, sweat breaking out on their foreheads. Numbness often swiftly follows.

Most first timers I’ve watched freeze, grasping for some way to get out of the mess (“This can’t be happening – make it go away!”). Others lapsed into old coping methods that in the past had distracted them (but again here they found themselves not taking immediate action to fix the mess).  Some experienced ensuing panic attacks and inability to take any action.

I observed the opposite in startup veterans. They had been through the terrible times before and were confident their skill to swiftly start working on resolving the situation. In a nutshell, I found the entrepreneurial veterans were able to function in spite of a crisis, and in some cases the mess showed just how amazing their leadership skills were. I also noted that serial entrepreneurs were rarely caught off guard – they knew bad things can happen and thus they had prepared some form of a general course of action in case a crisis event arrived.

You can do the same. Here is a crisis preparation checklist I’ve found helpful. It’s how Maynard Webb author of “Dear Founder” handles a crisis.[i]. Included are my suggestions for what I’ve found works for many startup leaders, first timers or veterans.

• What’s the magnitude?
  • “Is this a seasonal dip in monthly sales or has our leading product stopped selling at our top ten accounts?”
  • “Does the crisis involve just a few staff members or threaten the very existence of the company?”
  • “Is this as a one-meeting-fix or has it the potential of taking months of time to solve?”
• There’s no time to waste.
  • 100%. Veterans will stop all their other activities the same day the crisis arrives and focus on assessing and addressing the crisis situation.
  • CEOs will contact all direct reports the same day and, after brief discussions, schedule a group live session within 24 hours.
• Deploy your resources.
  • Start with your direct reports. After your first group meeting, assign them to specific, short term deliverables: put out the immediate fire and start work on repairs and a plan for recovery.
  • Begin with a second group meeting that meets weekly or, if the situation is life critical, make it a daily session until the immediate fire is out.
  • Veterans will quickly contact people in their network, conveying the crisis situation and soliciting advice. NOTE: A prepared CEO will have created a quickly accessible list of who to call in a crisis.
    • Board members get personal phone calls – text to set them up quickly.
    • Advisors and consultants are contacted and often are assigned work.
  • Get the right people in place.
    • You are likely to have to quickly move people into firefighting: send some to customers and others to suppliers, while others start talking to employees.
    • Some employees may be needed to promptly respond to customer emails and texts.
  • Have a backup plan. And a backup for the backup.
  • Swallow your pride. This is not about you, the CEO, it’s about how your company (people working together) can attack the problem, solve it, and get back on to the road of viable growth.
    • Be honest. Hiding will get you into deep, deep trouble: when people discover your coverups, they will begin to doubt your capability as their leader, plus their loyalty will drop a notch or more; they’ll begin looking for how close the exits are.
    • Declare facts – avoid speculation and guessing.
    • One veteran told me “It’s not the crime, it’s the cover-up that makes a crisis worse.”
  • Do everything possible to minimize impact for customers.
    • Street smart startup leaders avoid broadcasts of a crisis.
    • Veterans will have a short paragraph of the situation ready for sending to customers, if needed.
  • Communicate with everyone.
    • Tell the truth
    • Tell them the next steps.
    • Tell them when you will update them again.
  • Postmortems are essential.
    • What happened? When? Why? What was the source?
    • What did we learn from this crisis (to prepare better for the next one)?
  • From now on, plan for crises in advance. Try one crisis planning session per year.

[i] Dear Founder, 291-286.

I wish you The Best on your Adventure!

JOHN

STARTUP CULTURE: CENTRAL TO WINNING

Culture is the invisible guide to how your startup will win.

It is about how things get done in your company. 

Your early hires will shape it, so pick them very carefully!

When every employee (and contractor) understands your company’s culture, people do what is needed to be done, with little need for supervision. Serial entrepreneur Maynard Webb said “. . . I realized that I needed to implement practices and a culture that ensured execution happened without my direct involvement on every piece. I needed to ensure things got done without micromanaging.”

Culture enables execution to be fast and efficient, exactly what tiny startups require to execute a business plan and thrive.

It keeps people going even during terrible times. Twice Apple fell into the critical care ward on life support, yet the culture kept the company alive, even when its founder got fired. And it recovered to become the great Apple.

Culture sets guardrails that limit moral corruption.

Culture communicates what’s important to everyone.

It becomes visible in the behavior of the startup’s people when the fledgling enterprise encounters the joys and sorrows along the startup trail.

Culture is the soul of the new enterprise.

It is the collection of passions, dislikes, and preferences of everyone, and the reasons for each person joining the startup. Values, politics, religions, morals are included. It’s big and it’s full of potential trouble – as well as goodness. It can be terrible when it gets out of control -- as Google experienced painfully. Under control it is considered the key to success by serial entrepreneurs.

Culture’s beginning is in the founder’s soul. It’s what she believes, what he lives for. It’s deep and does not change – until disaster requires open heart surgery. Try Uber.

​Over decades I've watched veteran startup builders deliberately build their company's culture. They take time to craft and compile the essence of the culture of their startup. They begin documenting the founder’s vision and mission in a simple, short statement. Then follows a document of the values of the culture that becomes what the company will stand for, what gives it meaning in life, what makes it a standout. . Sometimes referred to as “core values,” those are a short list (one tiny paragraph each) of what is valued by the early people in your startup, beginning with the founder.​

I wish you The Best on your Adventure!

JOHN

STARTUP MANAGING: FIRST HIRES ARE TOUGHEST & COMPROMISES KILL

The early startup hires are the toughest to select well. Every new enterprise is hungry for people. The early hires shape each company’s long-term culture and make near-term decisions critical to executing its plan.

Hiring the best talent is required – it’s not an option in my experience. The best people greatly increase your likelihood of success. Highly able people attract more of the same. They are comfortable making tough decisions under demanding circumstances. The results will be amazing for your startup.

Over decades, I’ve found hiring compromises inevitably lead to the demise of new enterprises. I’ve seen attempts by founder CEOs to “save money” by deliberately hiring “average” people who cost less. Consistently the CEO ended up shutting down the business. It seems to be a startup rule. All or nothing, Just the best you can hire or don’t start.

Hiring errors can kill a startup. They cause trouble with the company’s culture and trigger near-social-riots that greatly distract the company’s management. I find a wrong-fitting person is like a cancer that grows until radical surgery.

SNAP dating founder, Cliff Lerner describes this in his book “Explosive”: “One lesson I learned too late when trying to solve the culture clash was if there’s an employee who looks good on paper, but doesn’t reflect the company’s values, I should let them go sooner rather than later.” He goes on to say “The longer that person is kept at a position that everybody knows isn’t working out, the worse it is for both parties. So pull the trigger, let the person go, and get on with business.”

Hiring exceptional talent is very challenging, but can be done and is very worth the effort. Cliff Lerner said about an engineer of a huge product project, “I gave him the chance to sing. . . . Ultimately, my faith in him was rewarded, because in just weeks, he almost single-handedly built something that matched up billions of social connections. Once again, the power of a terrific engineer – A-list talent – led to extraordinary results.”[i]

You are in a hurry, have a hyper sense of urgency to get going: get into the market selling your first product before competitors, or you are dying inside because your company is not growing as fast as your targeted, wildly growing market is. Those emotions are powerful and can lead to rushing with hiring decisions. Poor choices are painful to realize and eliminate. After departures, they leave scars.

Securing the best people that you can find takes time, intense effort and a lot of recruiting skill. That’s a skill that venture investors and experienced builders of startups will look for that in the founder CEO before they join. It’s critical to the success of your new business.

I wish you The Best on your Adventure!

JOHN